Entrenched municipal bureaucracy and escalating tariffs are putting unprecedented pressure on project timelines and budgets, and even worse, cancelling the tendering of planned public infrastructure projects for this year. The situation, however, is not all bleaks. The funds to maintain and expand Ontario’s infrastructure already exist. With minor financial adjustments, legal support and a changed mindset, the construction season could be back on track.
The issues facing the construction season are twofold: The current, outdated, procurement process and President Trump’s tariffs.
Procurement
On April 2, the City of Toronto (City) published the results of a long-term study of its capital delivery process, particularly focused on construction. The report recommends the City should reform its capital delivery process to decrease delays in project starts, improve transparency and standardized practices. Some of the key recommendations include:
- Developing a stage gate process to enhance decision-making and oversight. Each stage involves specific activities and deliverables that must be completed before moving to the next stage, allowing time for evaluation of progress against overall project objectives. By way of comparison, the current capital works procedures manual covers the pre-design, detailed design and construction phases. The recommendation introduces stage gates, breaking down the existing phases into smaller stages, from concept to handover, passing by the design, procurement, construction and closeout stages. Thus, introducing structured decision points and greater accountability throughout the project lifecycle, including making informed decisions before committing further resources.
- Developing a project charter setting out project’s scope and objectives, initial committed resources/stakeholders, budget and timelines for reducing unrealistic expectations throughout a project’s lifecycle. The project charter should be referenced as an informational document throughout the project’s lifecycle. It should also be reviewed prior to each stage of the project’s lifecycle and updated as required. Thus, reducing the risk of scope creep, miscommunication, and conflicting stakeholder priorities.
- Updating project approval thresholds and delegating authority levels for project managers regarding project-related changes (e.g., Change Orders related to scope, schedule, budget) and Purchase Order Amendments (POAs), which can otherwise be a time-consuming approval process.
- Enhancing in-field decision making for on-site inspection and contract administration, specifically in supporting the project manager in areas including design development and commercial management (e.g., claims, quality assurance). In addition to the benefits of increased on-site inspection in preventing project delays and increased costs, project owners are likely already taking steps in light of this recommendation as a result of the Supreme Court of Canada’s decision in R v. Greater Sudbury (City), 2023 SCC 28, which found the city of Sudbury liable for incidents on site despite ceding control to the contractor.
These recommendations, if adopted, should yield great benefits to project administration and execution, as opposed to the City’s procurement process, which has redundant steps, causes delays in project execution and higher administrative costs, and often has multiple city departments with impacts on project execution. Stay tuned for further developments as we may very well see them sooner rather than later.
Tariffs
As the United States continue imposing a range of tariffs on several countries, with Canada, China and the European Union responding with their own retaliatory tariffs, the construction industry will need to carefully consider available remedies under contracts, including mitigating tariff risks.
Parties to projects with lump sum agreements or fixed pricing will eventually have to revise their working methods and adjust their supply chain for materials that have not yet been procured, to increase efficiency and meet the initial project costs’ valuation. That being said, even in contracts that did not account for trade or tariff uncertainties, contractors may seek relief under other contractual provisions that provide for increasing or decreasing the contract price if duties change. Indeed, similar provisions can be found in CCDC-2 and CCDC 5B standard form of contracts. Although ‘change in law’ is neither what one qualifies executive orders imposing tariffs, nor ‘force majeure’ deals with what appears to be inconsistent price disruption, however similar contractual provisions should be reviewed for any potential relief in a construction context.
In addition, although the imposition of tariffs has not impacted on work in the pipeline, the uncertainties arising from the ongoing threat of further tariffs will likely ground to halt major projects. The situation may cause a shift in the workforce to other work streams that are progressing nonetheless, which may cause issues of resources for ongoing projects, or whenever construction works come rolling back. The situation is emphasized with the construction sector already suffering from labour shortages, currently at a vacancy rate of 3.8% according to CFIB Main Street Quarterly Q1 2025. The situation becomes critical whenever a project enters a phase that requires more resources on site. Thus, causing time extensions and delays, unless revised/more efficient working methods are adopted, such as re-sequencing project activities, extended shifts, and embracing robotic tools. In this regard, contractual provisions including price escalation, delays, extension of time, acceleration, claim procedures and liquidated damages should be reviewed to allocate responsibility for labour risk generally, and delays more specifically.
Recommendations
In response to the tariff volatility, construction parties should consider their contractual provisions carefully, including risk allocation, price escalation, change in law, force majeure, extensions of time and delay claims to determine where relief may be available. Separately, seeking early legal input on tendering, procurement strategy and project structuring can provide critical advantage that reduces risks and enhance overall project outcomes.
